Those of you who are football fans know by now what happened on Sunday night. Bill Belichick, the head coach of the New England Patriots, made a decision to “go for it” on 4th down (4th and 2) on his own 29 yard line when up by 6 points with a little over 2 minutes remaining. On the 4th down play, the Patriots came up short (because a player either couldn’t catch the ball properly or the side judge made a bad spot), turned the ball over to a Peyton Manning-led Colts offense who scored a touchdown and won the game by 1 point.
Virtually, the entire sports talk universe has called Belichick out for his decision to go for it on 4th down as opposed to punting the football. However, it’s pretty evident that the degree of opposition to Belichick’s decision amongst the sports public and even so-called football experts is disproportionately high compared to the true probability that Belichick’s decision would fail. In fact, a few statistical geeks have even suggested that Belichick made the correct decision under the criterion that head coaches are supposed to use: maximize the probability of your team winning. But in reality, most coaches would have punted the football.
Interesting you may say, but what does this have to do with economic policy?
The type of response we see to Coach Belichick’s decision is too often what we also see in public policy debates: there is a bias for what is seen versus what is not seen. One can easily blame Belichick’s decision for the Patriots losing the game. But there was still a significant probability that the Patriots would have lost the game had he made the opposite decision and punted. And even though the probabilities of winning under either decision may have been the same (or Belichick may have even made the right decision from a probability perspective), Belichick would not have been blamed had he punted and the Patriots still lost. In summary, even though a given decision may be 50/50 from the perspective of maximizing the team’s chances to win, there is an asymmetry in terms of the payoffs from the coach’s perspective. In other words, as Steven Levitt pointed out, we have a principle-agent problem where the self-interests of the head coach are not aligned with the interest of the team (i.e. winning the game).
This is the same reason the FDA is more likely to disapprove a healthy drug than approve an unhealthy drug. If the FDA approves a drug that kills people, the media and the general public will go crazy. But they don’t see the fact that every year, the FDA is disapproving relatively healthy drugs and costing lives. And it’s why politicians would rather have a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. code that uses tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s that favor one industry over another at the expense of higher taxes on others. Everyone sees the benefits of the tax credits helping Industry A (and politicians will be there at the ribbon-cutting ceremonies to take credit for “creating jobs”), but the public doesn’t see the higher taxes on Industries B, C, and D. It’s also why the public supports significant restrictions on international trade. A factory closing in Ohio can be easily blamed on cheap foreign labor because the link of causation is rather short (the factory moves to Mexico or Asia). But the benefits of that cheap foreign labor (like lower prices for consumers and higher productivity) aren’t seen by customers as being derived from that free trade policy.
Or the best example may be sticking with the sports world. New sports stadiums are often cited by those in the sports community for their apparent “economic impact” on regional economic growth. But what those advocates never talk about is that the resources devoted to building a sports stadium are resources diverted from more productive economic uses.
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